Remember all of the news headlines back in 2019 touting the “skyrocketing” housing prices in London Ontario? Those were cute. Just the other day I was doing some digging on a few articles I had saved and came across this one posted back in December 2019 with the headline “The Price of an Average London Home Could Hit 450K in 2020”. Oh, how naive we were.
So far 2020 has been a wild one and real estate is no exception to that. But what exactly has happened in real estate this year? And what does that mean for you? Here is a summary of the housing market in 2020 and a look into how to interpret the numbers.
Increased Average Sale Price
You’ve probably heard multiple stories of people who are trying to buy right now putting in offers well above asking price only to be out-bid. The average sale price in London as of right now is sitting around $530K. In January of 2020, the average sale price in London was sitting around $380K. That means that within 10 months the market saw a price increase of 29.5%. Which, if you’re thinking about real estate as an investment, is an incredible return rate. Just saying.
Take a look at the graph below which showcases the steady and significant increase in the average sale price in London from January to October. We find the visualization of that increase to be almost shocking.
It has been London South that has had the biggest hike in the average sale price, with an increase of 33.60%. The average sale price in London South is sitting around $535K.
Increased Number Of Sales
When COVID hit hard and lockdown orders came out, the real estate market saw a sudden halt. While normally spring is where the most number of sales happen in the year, April had the biggest drop of the year for sales volume as you can see in the graph below. This makes sense as everyone hunkered down to flatten the curve. But with people working from home, children doing their schooling from home, and families stuck inside, the itch to move to a house that was more suitable for the new normal struck hard. Families wanted a home office, recreation rooms, and more space in general. Plus, the Real Estate community adapted quickly and was able to put forth measures to ensure safe ways for people to buy and sell homes while distanced. So as the summer hit, we saw the number of sales quickly increase and we easily made up for that halt in April. So far this year we’ve had 31.3% more sales than in 2019.
The Effects Of Supply And Demand
A quick economics lesson for anyone who doesn’t quite know about supply and demand: if more people want cookies than there are cookies available, those people will be willing to pay more for the cookies because they want to ensure that they get a cookie.
With the number of people looking to buy a house in London being more than the number of people selling a house, supply and demand comes into play and houses start selling for more than the asking price. And this is what creates a seller’s market.
Below is a graph that shows the ratio of sale price versus the listing price. As you can see, right before lockdown and in the summer months, most homes were sold above their asking price.
Below you can see the Months of Inventory graph. What this shows is that if no new homes were to enter the market to sell, how many months would the current inventory of homes for sale last until every home was sold and there was nothing left for buyers. As you can see from the graph, the inventory is very low. In October we’re seeing just a little over a month of inventory. This low supply is exactly why, with such high demand, we’re seeing housing prices up so much.
Because it is a seller’s market and more people are looking to buy than there are houses to purchase, homes are not sitting on the market for very long before selling. As you can see homes are only on the market for a little over two weeks before being sold. That is not a long time for homebuyers to get the chance to look at a house and compare it to other homes before it gets snatched out from under them! (Of course, that’s why having a good real estate professional is so essential.) On the flip side, it means that if you’re selling your home you’re not going to have to wait long or go through months of showings and keeping it spotless.
Below is a graph that shows the average number of days that a property is on the market before it sells from January to date in 2020.
What This Means For You
If you’ve been wondering about selling your home, a seller’s market is a great time to sell! You won’t have to worry about a lengthy selling process with lots of viewings and open houses. Most of the time offers that come in are coming without conditions, meaning that it’s less likely for offers to fall through, putting less of a risk on the sellers.
If you’ve been wanting to jump in on the action and buy a home while the housing market is so hot, it’s not too late! With Toronto and the GTA’s housing prices being so high, London is such an affordable place to live. This was causing a lot of Torontonians and those who work in the GTA to search for homes in London, feeling that the commute was worth the lower cost of living. With remote work becoming more and more common, especially because of the pandemic, this flood to London has only increased. Because of this, many experts are saying that our housing prices are going to continue to increase.
If you’re a first-time-home-buyer, the market might feel overwhelming right now, but interest rates are low and there are plenty of programs that the government has put in place to help first-time home buyers. Make sure you talk to your local real estate professionals about what options are out there for you.
More than ever with this year we’re seeing the importance of buying a house that really is a home. Lots of companies are transitioning to remote work permanently now that they’ve been able to make it work for their employees and people are realizing the need for a home office. Families and young professionals who used to eat out often are now cooking at home and are realizing the importance of a functional kitchen. With many entertainment options closed, people are looking for ways to get the most out of their entertainment at home and theatre rooms, games rooms, exercise rooms and rec rooms are being more and more sought after. Your dream home is out there! And while the market might be a little more gritty for buyers, a great real estate team can help you find a home to help you suit your needs.